The investing landscape has been a minefield in recent years. The stock market has offered little real return with increased volatility and risk as the Federal Reserve continues printing money and purchasing debt through its quantitative easing programs. Bonds have been offering negative rates of return when inflation is taken into account. Real Estate prices have plunged to their lowest levels in decades as defaults and foreclosures have climbed to historic levels. Many investors looking for increased returns are turning to experts like US Money Reserve for information on adding precious metals and numismatic coins to their investment portfolios.
The stock market entered a long-term cyclical bear market in 2000. During this same period, metals began a long-term cyclical bull market that has seen double-digit annual returns for gold and silver. Investors who are wondering if these returns can continue need to consider the following:
• Long-term market cycles can last from 18-25 years. The stock market bull that began in 1982 ended in 2000. The recent bull market in precious metals began in 2000 and has room to run.
• Gold, silver and platinum have long traditions as “real” money have never been worth zero.
• Along with market cycles, the current case for gold is extremely bullish for reasons including increasing demand and monetary policy. Silver and platinum also have tremendous and growing demand as industrial metals. They are used in technology, medical applications and in the case of platinum, environmental remediation.
Let’s look at several factors that all point toward precious metal’s continued appreciation.
Supply and Demand
Demand for gold has been on the rise. Central Banks have become net buyers of gold in recent years. Russia recently announced that it has purchased 570 metric tons of gold since 2002 slowly replacing dollar denominated assets as it builds its reserves. Recent moves by the governments of India and China to encourage members of their newly expanding middle classes to purchase gold in all forms have contributed to substantial growth in demand worldwide.
The Fed began round three of its quantitative easing policy in September of 2012. QE3 is an open-ended policy of purchasing up to 40 billion dollars of mortgage-backed securities per month. This number has recently grown to 85 billion monthly. At a recent FOMC meeting, the Fed announced that this policy would remain in effect until 2014 at the earliest. Recent moves by the European Union, Japan and China to implement stimulus policies will continue to contribute to the bullish sentiment for precious metals.
The recent fiscal cliff debates have shown that our leaders in Washington are extremely divided on tax policy and spending. This spring we will have round two of the fiscal cliff debate and negotiations over sequestration all while the budget battle continues.
The Case for Precious Metals
Gold, silver and platinum have traditionally served as a safe haven during times of economic uncertainty, political instability and social unrest. Diversifying your investment portfolio to include gold, silver and platinum is a smart investing decision. Be sure to work with a reputable, knowledgeable, dealer like US Money Reserve. They can help you to develop an investment plan that fits your needs.